The fifth annual Responsible Finance Forum took place on August 28-29, 2014 in Perth, Australia, convening over 100 industry, government and private sector leaders to discuss how digital financial services can be delivered in a transparent, fair and safe manner. Focusing exclusively on the use of technology to provide financial services and products for the poor, the Forum enabled participants to share specific approaches that private and public sector actors can take to address emerging risks from the expansion of digital financial services.
Participants noted that unreliability of digital financial services and inadequate customer recourse mechanisms can dampen the trust in such services among the poor and thus limit their uptake and usage. Results from a global survey taken ahead of the Forum revealed that a majority of respondents believed that global principles, standards and codes of conduct for responsible digital finance are needed. There was broad consensus among the participants at the Responsible Finance Forum to explore the development of such guidance as part of a multi-year global dialogue among all stakeholders.
“Digital technology offers tremendous opportunities to expand access to formal financial services. But it is important to also consider and address its risks in order to ensure that it benefits the customers, especially the poor,” said Peer Stein, Director, Finance & Markets Global Practice of the World Bank Group.
Over 2.5 billion adults worldwide lack access to formal financial services and digital finance is widely recognized for its potential to significantly expand financial inclusion and thereby improve the livelihoods of the poor. While the use of digital technology, such as mobile money or electronic payments, can improve access to formal financial services for the unbanked, these new business models and delivery channels can also carry new risks for consumers and small businesses. Against this backdrop, the discussions at the Responsible Finance Forum focused on risks with particular relevance to digital financial services, including breaches of data protection, fraud, and inadequate consumer recourse, among others that pose challenges for both financial service providers and regulators.
“Low-income consumers can be particularly vulnerable to the risks that arise when financial products and services are delivered digitally,” said Katharine McKee, Senior Policy Advisor at CGAP. “If not addressed, risks such as fraud or opaque prices can undermine the confidence of consumers and limit the uptake and usage of digital financial services.”
“The Responsible Finance Forum provided a starting point from which to develop umbrella principles to advance responsible digital finance. These high-level principles could inform more specific standards and codes for financial services providers, mobile network operators, and technology companies providing services, as well as influence policies and regulations of financial and telecommunications regulators,” stated Beth Porter, Policy Advisor, BTCA/UNCDF.
"The Forum was an important milestone in bringing digital finance to the forefront of responsible finance and reinforcing the importance of the private sector for fostering innovation for responsible financial inclusion," said Susanne Dorasil, Head of the Economic Policy and Financial Sector Division at the German Federal Ministry for Economic Cooperation and Development (BMZ).
The Forum also marked the launch of a live web platform - a one stop shop for sharing and accessing knowledge, as well as discussing and collaborating on responsible finance. The RFF Platform will provide a central space for stakeholders and practitioners to advance responsible finance and move towards the goal of full financial inclusion by 2020, responsibly.
The Responsible Finance Forum was followed by the G20 Global Partnership for Financial Inclusion (GPFI) Plenary and Forum on September 1-2, 2014, in Perth, where digital finance continued to be discussed.
Organizers of the Responsible Finance Forum included BMZ/GIZ, Better Than Cash Alliance, CGAP, the Bill & Melinda Gates Foundation, IFC, Netherlands Ministry of Foreign Affairs, The MasterCard Foundation, the United Nations Capital Development Fund (UNCDF) and the World Bank Group.
About the Better Than Cash Alliance
The Better Than Cash Alliance is an alliance of governments, private sector and development organizations committed to accelerating the shift from cash to electronic payments. The Better Than Cash Alliance is funded by the Bill & Melinda Gates Foundation, Citi, Ford Foundation, MasterCard, Omidyar Network, USAID and Visa Inc. The UN Capital Development Fund serves as the secretariat. More at https://betterthancash.org/
CGAP (the Consultative Group to Assist the Poor) is a global partnership of 34 leading organizations that seek to advance financial inclusion. CGAP develops innovative solutions through practical research and active engagement with financial service providers, policy makers, and funders to enable approaches at scale. Housed at the World Bank, CGAP combines a pragmatic approach to responsible market development with an evidence-based advocacy platform to increase access to the financial services the poor need to improve their lives. More at www.cgap.org
UNCDF is the only UN agency mandated to focus primarily on the LDCs and has a unique financial mandate within the UN system: it provides investment capital and technical support to both the public and the private sector. UNCDF has proven its ability to deliver true leverage on smaller and more risky investments and interventions within its core areas of expertise: Inclusive Finance and Local Development Finance. UNCDF’s work on inclusive finance seeks to develop inclusive financial systems and ensure that a range of financial products is available to all segments of society, at a reasonable cost, and on a sustainable basis. UNCDF’s work on local development finance aims at ensuring that people in all regions and locations benefit from economic growth. This means investing domestic resources into local economies and services through, inter-alia, fiscal decentralization, climate finance and project finance. More at www.uncdf.org
About the World Bank Group
The World Bank Group plays a key role in the global effort to end extreme poverty and boost shared prosperity. It consists of five institutions: the World Bank, including the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA); the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Working together in more than 100 countries, these institutions provide financing, advice, and other solutions that enable countries to address the most urgent challenges of development. For more information, please visit www.worldbank.org, www.miga.org, and ifc.org.